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Tuesday, 3 March 2009

The appalling terrorist attack on the Sri Lankan cricketers in Pakistan had one aim: to demonstrate to Washington that the country is ungovernable. This is the first time that cricketers have been targeted in a land where the sport is akin to religion. It marks the death of international cricket in Pakistan for the indefinite future, but not just that, which is bad enough. The country's future is looking more and more precarious. We do not know which particular group carried out this attack, but its identity is hardly relevant. The fact is that it took place at a time when three interrelated events had angered a large bulk of the country and provided succour to extremist groups and their patrons.

The first is undoubtedly the foolish decision by Washington (backed by Britain) to send more troops to Afghanistan, which has now united all those resisting them in that country and the North-West Frontier province of Pakistan. Instead of searching for a viable exit strategy, Obama has gone for a surge. On several occasions, I have warned that escalating the war in Afghanistan could seriously destabilise Pakistan and its army.

Second, Senator Dianne Feinstein's revelation that the US drones being used to target "militants" and "terrorist havens" inside Pakistan were, in fact, being despatched by the US from military and air-force bases inside Pakistan (obviously, with the approval of the Pakistani military and civilian leaders) created mayhem in the country. The shock and dismay should not be underestimated. Half-hearted government denials further fanned the flames. Since many in the country regard Zardari and his cronies running the country as US drones, the anger was multiplied.

"In continuation of Global Investment House coverage of the Omani Banks, we have come out with a sector update on Omani Banking Sector.

The roller coaster ride that was year 2008, provided mixed results for the Omani banks. The Omani economy is expected to a register an estimate 3.5% real GDP growth in 2008. The ministry of national economy commented in its 2009 budget that it would continue to grow, however at a lower rate of 1% in 2009. Though, the current economic environment presents numerous challenges ahead, the enhanced spending by the government (leading to a RO800mn budget deficit for 2009) and the eco-political stability should help tide over this crisis. In the medium term however, we are positive on the sector considering its relative insulation to the real estate sector exposure and lower loan losses unlike its counterparts in the GCC region. The combined profits of the listed Omani banks increased by 9.2% in 2008 from RO179.5mn in 2007 to RO195.9mn.

The Department of Foreign Affairs has denied a report 13 Australians have been detained in connection with a property scandal in Dubai.

It follows reports that 13 Australians had been arrested in connection with a bribery scandal, including three industry heavyweights.

But DFAT says Australians in the United Arab Emirates under detention or arrest have been charged with a range of offences, from relatively minor to relatively serious and some of the cases date back to February 2007.

Gowealthy Capital Limited, a subsidiary of Gowealthy Holdings, is to launch three property investment funds in the second quarter of 2009 with a combined value of $325 million (Dh1.19 billion).

While the details have yet to be ironed out, the residential funds will be launched on behalf of two "significant" developers - one of which is listed - according to Peter Penhall, chief executive of Gowealthy and senior executive officer of Gowealthy Capital Limited.

The funds will be regulated by Dubai International Financial Centre (DIFC) and will have exit strategies.

The negative public sentiment and concerns about the political motives of sovereign wealth funds (SWFs) is now finally subsiding, thanks to the credit crisis and global economic slowdown.

SWFs – particularly those in the Middle East – have proved that they merely act on pure economic motivation.

In the UAE, its more than $1 trillion (Dh3.67trn) funds have not only given a stabilising effect on the financial markets and had helped the Western state's ailing institutions, its SWFs are also helping reduce the inflation in the emirate by pumping excess liquidity out of the market.

The Abu Dhabi Government is planning to set up an industrial bank to finance projects in the emirate, especially in Abu Dhabi Industrial City, said an official from the emirate's planning department.

Speaking to Emirates Business on the sidelines of the Abu Dhabi Economic Forum at Emirates Palace yesterday, Mohammed Omar Abdullah, Under-Secretary for Abu Dhabi Department of Planning and Economy, said: "Industrialists and businessmen have urged the department to set up a bank to finance their projects, with the government having the biggest role in it.

"We are studying the possibility of setting up the bank. It is a good idea to finance industrial projects to develop Abu Dhabi's industrial sector, which the government hopes will play a big role over the next few years. The suggestion needs careful study, and this is what is being done.

NASDAQ Dubai yesterday launched the region’s first Sharia-compliant tradable security backed by gold to satisfy a growing demand for the precious metal as a safe haven in the global recession.

The product, which trades in the same way as an equity share and tracks the price of gold, is aimed at the region’s high-net-worth individuals who are looking to diversify their portfolio, while conforming with Islamic investment principles.

Named Dubai Gold, the product will allow them to invest in the metal without taking physical delivery. Each share initially represents one tenth of an ounce of gold.

The global slowdown could prompt adjustments in Abu Dhabi’s economic plans for the next five years, but it will not cause any modification of the emirate’s plan to diversify and expand its economy in the long run, a government official says.

“The principles and priorities for the 2030 plan have not changed,” said Mohammed Abdullah, the undersecretary of the Abu Dhabi Department of Planning and Economy, referring to the long-term blueprint for the emirate.

“However, we are taking into consideration the economic challenges for the shorter, five-year plan.”

Abu Dhabi’s Tourism Development and Investment Company (TDIC) plans to tap capital markets this year to help fund a portfolio of projects worth Dh100 billion, an executive from the company said yesterday.

The projects, such as the hotel and museum ventures on Saadiyat Island and Al Bateen Wharf on Abu Dhabi Island, are central to the capital’s 2030 plan to triple the population of the emirate and evolve into a leading cultural destination.

“This year, part of this strategy will be to access the capital markets for longer-dated debt to match the maturity profile of our projects,” said Mubarak al Muhairi, the managing director of TDIC.

Abu Dhabi’s Aabar Investments has purchased €49.8 million (Dh230.3m) of convertible bonds in UniCredit, the Italian lender, as European banks seek capital to cope with the financial crisis.

The move comes as the financial meltdown in many banks in central and eastern Europe is creating opportunities for Gulf investors, say analysts.

UniCredit is the biggest lender in central and eastern Europe and its shares have fallen to 12-year lows partly due to investor concerns about its exposure to the region’s problems. The bank gets about a quarter of its revenues from eastern and central Europe, and a spokesman said yesterday it had no concerns about its operations in the region.

Consumers have expressed relief that the UAE’s once surging inflation rate seems to be on the way down, bringing the cost of living to more manageable levels.

“I’ve noticed housing prices falling and also a lot of stores and supermarkets providing discounts and special offers,” said Ahmad al Suweie, a 27-year-old Emirati businessman who has three children. “This could be the start of a trend of falling prices. I hope so.”

Sultan bin Saeed al Mansouri, the Minister of the Economy, told reporters on the sidelines of the Abu Dhabi Economic Forum yesterday that the Government was hoping that inflation would drop to five per cent this year. The true rate of inflation is difficult to ascertain. The ministry reported a 12.2 per cent rate in March last year, excluding Abu Dhabi, but there have been no official figures since then. In October, the IMF predicted in its regional economic outlook that UAE inflation would probably be 12.9 per cent for 2008, then ease to 10.8 per cent in 2009.

Muslim presidents, prime ministers and princes on Monday called on the world to adopt Islamic financial practices to overcome the global crisis and urged Islamic banks to undertake “missionary work” in the west to promote shariah banking.

Almost every speaker at the opening of the fifth World Islamic Economic Forum (WIEF) in Jakarta lambasted the excesses of “irresponsible, unregulated western financial markets” for triggering the crisis, and touted shariah banking as a framework for a more stable global financial system.

But while Islamic banking could play a useful role, it would not be a “silver bullet” for the crisis. Bankers at the conference said greater standardisation of structures, improved transparency and more innovative products were needed for the industry to develop.

The United Arab Emirates, largely bankrolled by Abu Dhabi, was bound to step in to rescue debt-laden Dubai. Unfortunately, the march to bail-out at the end of last month was so painfully slow, and so lacking in clarity, that the impact of the $10bn federal loan, part of a $20bn five-year Dubai bond issue, could be less dramatic than intended.

Back in October, when the financial meltdown had only just begun, the UAE was the most pro-active among its Arab peers in moving to safeguard its economy by injecting funds into the banking system and guaranteeing deposits.

But the message that action carried – that the federal system would kick in with force when needed – was soon drowned out by the alarm over the high leverage of Dubai’s quasi-government entities and rumours over what form an eventual bail-out would take.

Despite a proliferation of towers under construction and an increase in gaudy hotels in Doha, the capital (pictured above), Qatar can still seem sleepier than most Gulf countries. Yet, while other states contemplate the prospects of contraction or low or non-existent growth, Qataris can be confident that their economy is red hot.

The International Monetary Fund forecast in January that Qatar’s economy would grow a giddy 29 per cent in real terms this year, up from an estimated 16.4 per cent in 2008. This compares to an expected global economic expansion of just 0.5 per cent in 2009, the lowest since the second world war.

“It feels like there is a storm going on, but just over at our neighbours and not over our house,” says David Salt, partner at law firm Clyde & Co in Doha. Another senior expatriate sums up the feeling of Qataris in a word: “Smug.”